You have saved for a down payment, gotten pre-approved, and found the perfect home. But before you get the keys, there is one more expense to plan for: closing costs.
What Are Closing Costs?
Closing costs are the fees and expenses you pay to finalize your mortgage and complete the home purchase. They are separate from your down payment and typically range from two to five percent of the purchase price.
Common Closing Costs for Buyers
Here is what most buyers can expect to pay:
- Loan origination fee: A fee your lender charges for processing your mortgage, usually 0.5 to 1 percent of the loan amount.
- Appraisal fee: Covers the cost of having the home professionally appraised, typically 300 to 600 dollars.
- Title insurance: Protects you and your lender against title defects or ownership disputes.
- Home inspection: While technically paid before closing, this is an important cost to budget for, usually 300 to 500 dollars.
- Escrow deposits: Your lender may require you to prepay property taxes and homeowners insurance into an escrow account.
- Attorney fees: In some states, an attorney must review or oversee the closing.
- Recording fees: A small fee charged by the local government to record the new deed.
How to Estimate Your Closing Costs
Your lender is required to provide a Loan Estimate within three business days of your application. This document breaks down your expected closing costs so you can plan ahead. Before closing, you will receive a Closing Disclosure with final numbers.
Can You Negotiate Closing Costs?
Yes. Some closing costs are negotiable. You can ask the seller to contribute toward your closing costs, shop around for title insurance, or negotiate lender fees. Your Homexa® agent and loan officer from Perfect Fit Loans can help you identify savings opportunities.
Can Closing Costs Be Rolled Into the Loan?
In some cases, you may be able to roll closing costs into your mortgage. This reduces your upfront expense but increases your loan balance and monthly payment. Talk to your lender about whether this option makes sense for you.
Tips to Reduce Closing Costs
- Compare Loan Estimates from multiple lenders.
- Ask your agent to negotiate seller concessions.
- Look for first-time buyer programs that offer closing cost assistance.
- Avoid unnecessary add-on services.
Bottom Line
Closing costs are a normal part of buying a home. The key is to understand what they include and plan for them early so there are no surprises on closing day.